Fact sheet

CY19 ESRD/DME NPRM (CMS-1691-F) and DMEPOS Competitive Bidding Program Temporary Gap Period Announcement

CMS Updates to Policies and Payment Rates for the End-Stage Renal Disease Prospective Payment System, the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program; DMEPOS Fee Schedule Amounts, End-Stage Renal Disease Quality Incentive Program; and Payment for Renal Dialysis Services Furnished to Individuals with Acute Kidney Injury
(CMS-1691-F)

On November 1, 2018, the Centers for Medicare & Medicaid Services (CMS) issued a final rule that updates payment policies and rates under the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) for renal dialysis services furnished to beneficiaries on or after January 1, 2019.  This rule also updates the acute kidney injury (AKI) dialysis payment rate for renal dialysis services furnished by ESRD facilities to individuals with AKI, and finalizes changes to the ESRD Quality Incentive Program (QIP). The policies in this final rule aim to increase access to items and services for patients, drive competition, increase affordability, encourage facilities to adopt transformative and innovative therapies, and reward ‘out of the box’ ideas that will produce long-term savings that can be passed on to patients.

This rule also finalizes changes to bidding and pricing methodologies under the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program (CBP); adjustments to DMEPOS Fee Schedule amounts using information from competitive bidding for items furnished on or after January 1, 2019; new payment classes for oxygen and oxygen equipment and a new methodology for ensuring budget neutrality for oxygen payment classes; and special payment rules for innovative multi-function ventilators or ventilators that perform functions of DME. 

The DMEPOS CBP current contracts for the DMEPOS CBP will expire on December 31, 2018 and the process for recompeting these contracts with suppliers under DMEPOS CBP has not yet been initiated.  Starting January 1, 2019, there will be a temporary gap period in the entire DMEPOS CBP that CMS expects will last until December 31, 2020. During that time, Medicare beneficiaries may receive DMEPOS items from any Medicare enrolled DMEPOS supplier and in most cases, they won’t need to switch suppliers. For more information, please visit the Temporary Gap Period fact sheet.

In addition, in the proposed rule, CMS solicited comments in a request for information (RFI) on the gap-filling process for establishing fees for new DMEPOS items.  In the final rule, CMS summarizes the comments it received on how the gap-filling process could be revised in terms of what data sources or methods could be used to price new, innovative technologies in a way that complies with the statutory payment rules for DMEPOS items and services.

CMS is committed to transforming the healthcare delivery system – and the Medicare program – by putting a strong focus on patient-centered care, so providers can direct their time and resources to patients and improve outcomes. The ESRD PPS and QIPDMEPOS final rule is one of several rules for calendar year (CY) 2019 that reflect a broader Administration-wide strategy to relieve regulatory burdens for providers, support the patient-doctor relationship in healthcare, and promote transparency, flexibility, and innovation in the delivery of care.

CHANGES AND UPDATES TO THE ESRD PPS FOR CY 2019:

ESRD PPS BACKGROUND:  Section 1881(b)(14) of the Social Security Act (the Act) requires the implementation of a bundled PPS for renal dialysis services furnished to Medicare beneficiaries for the treatment of ESRD effective January 1, 2011.  The bundled payment under the ESRD PPS includes all renal dialysis services furnished for outpatient maintenance dialysis, including drugs and biological products (with the exception of oral-only ESRD drugs until 2025) and other renal dialysis items and services that were formerly separately payable under the previous payment methodologies.  The bundled payment rate is case-mix adjusted for a number of factors relating to patient characteristics.  There are also facility-level adjustments for ESRD facilities that have a low patient volume, for facilities in rural areas, and for the wage index.  For high-cost patients, an ESRD facility may be eligible for outlier payments.  The ESRD PPS also provides for a transitional drug add-on payment adjustment to pay for a new injectable or intravenous product that is not included in the bundled payment.  Under the ESRD PPS for CY 2019, Medicare expects to pay approximately $10.5 billion to approximately 7,000 ESRD facilities for the costs associated with furnishing chronic maintenance dialysis services.

Update to the ESRD PPS base rate:  The final CY 2019 ESRD PPS base rate is $235.27, an increase of $2.90 to the current base rate of $232.37.  This amount reflects a productivity-adjusted market basket increase as required by section 1881(b)(14)(F)(i)(I) of the Act (1.3 percent) and application of the wage index budget-neutrality adjustment factor (0.999506).

Rebasing of the CMS ESRD Bundled Market Basket and Labor-Related Share: For CY 2019, we are rebasing the ESRDB market basket to a 2016 base year; we periodically rebase the CMS market baskets in order to reflect more up-to-date cost structures.  The main impact from rebasing the ESRDB market basket is an increase in the labor-related share from 50.673 percent (using the 2012-based ESRDB market basket) to 52.3 percent (using the 2016-based ESRDB market basket).  From 2012 to 2016 the data show a relative increase in compensation costs and a relative decrease in all other costs, particularly drug costs. 

Annual Update to the Wage Index and Wage Index Floor:  The ESRD wage indices are adjusted on an annual basis using the most current hospital wage data and the latest Core-Based Statistical Area (CBSA) delineations to account for differing wage levels in areas in which ESRD facilities are located.  For CY 2019, CMS is not changing the application of the wage index, however CMS is increasing the wage index floor from 0.40 to 0.50, which will increase the wage index value for any areas currently below the floor.

Update to the Outlier Policy:  CMS annually updates the outlier policy using the most current data. CMS is updating the outlier services fixed-dollar loss (FDL) amounts for adult and pediatric patients and Medicare Allowable Payment (MAP) amounts for adult and pediatric patients for CY 2019, using 2017 claims data.  Based on the use of more current data, the FDL amount for pediatric beneficiaries will increase from $47.79 to $57.14 and the MAP amount will decrease from $37.31 to $35.18, as compared to CY 2018 values.  For adult beneficiaries, the FDL amount will decrease from $77.54 to $65.11 and the MAP amount will decrease from $42.41 to $38.51.  The 1.0 percent target for outlier payments was not achieved in CY 2017.  Outlier payments represented approximately 0.8 percent of total payments rather than 1.0 percent.  We believe in using CY 2017 claims data to update the outlier MAP and FDL amounts for CY 2019 will increase payments for ESRD beneficiaries requiring higher resource utilization in accordance with a 1.0 percent outlier percentage.

Expansion of the Transitional Drug Add-on Payment Adjustment (TDAPA):  In order to provide beneficiaries with more choices, promote innovation, and lower prices through competition, effective January 1, 2020, CMS is revising the drug designation process to allow all new renal dialysis drugs and biological products approved by the Food and Drug Administration on or after January 1, 2020, regardless of whether they fit into an existing ESRD PPS functional category, to be eligible for the TDAPA.  After the end of the TDAPA period, modifications to the ESRD PPS base rate will not be available for new drugs that fall within existing functional categories.  Additionally, effective January 1, 2020, all drugs and biological products paid under the TDAPA will be paid at 100 percent of Average Sales Price (ASP), with the exception of calcimemtics, which will continue to be paid based on pricing methodologies under section 1847A of the Social Security Act (which includes ASP+6) until they are bundled under the ESRD PPS.

Burden Reduction Related to the Comorbidity Adjustment:  In response to our burden reduction RFI last year, stakeholders commented that CMS should reduce the documentation burden for obtaining the comorbidity payment adjustment to make the requirement consistent with other payment systems or eliminate the comorbidity payment adjustments altogether.  CMS is finalizing a policy to rely on the International Classification of Diseases (ICD) official guidelines and general documentation requirements with regard to the comorbidity adjustment, consistent with other payment systems.  These guidelines provide clear direction on the coding and sequencing of diagnosis codes, and we will continue to monitor claims data to observe diagnosis reporting trends.

Impact Analysis:  CMS projects that the updates for CY 2019 will increase the total payments to all ESRD facilities by 1.6 percent compared with CY 2018.  For hospital-based ESRD facilities, CMS projects an increase in total payments of 1.7 percent, while for freestanding facilities, the projected increase in total payments is 1.6 percent.

PAYMENT FOR RENAL DIALYSIS SERVICES FURNISHED TO INDIVIDUALS WITH ACUTE KIDNEY INJURY (AKI):

As required by section 1834(r) of the Act, CMS is updating the AKI dialysis payment rate for CY 2019 to equal the CY 2019 ESRD PPS base rate and to apply the CY 2019 wage index.  For CY 2019, the AKI dialysis payment rate is $235.27.

CHANGES TO THE END-STAGE RENAL DISEASE QUALITY INCENTIVE PROGRAM (ESRD QIP):

ESRD QIP Background: Section 153(c) of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) amended the Social Security Act to require CMS to establish an ESRD QIP that selects measures, establishes performance standards, specifies a performance period for each payment year (PY), assesses the total performance of each facility, applies an appropriate payment reduction to each facility that does not meet a minimum TPS, and publicly reports the results.  The ESRD QIP is intended to promote high-quality care by dialysis facilities. This program changes the way CMS pays for the treatment of dialysis patients by linking a portion of payment directly to facilities’ performance on quality measures. The ESRD QIP will reduce payments to an ESRD facility under the ESRD PPS by up to two percent if the facilities does not meet or exceed a minimum TPS.

Finalized Policies Beginning with the PY 2021 ESRD QIP

Removal of Four Reporting Measures: CMS is finalizing its proposal to remove four reporting measures beginning with the PY 2021 ESRD QIP to align with the Meaningful Measures Initiative, which is a new initiative aimed at identifying the highest priority areas for quality measurement and quality improvement. The four reporting measures being removed from the program are:

CMS also finalized a proposal to update the measure removal factors used for the ESRD QIP to better align them with the measure removal factors CMS uses for other quality reporting and pay for performance programs, and the adoption of a new measure removal factor where the costs associated with a measure outweigh the benefit of its continued use in the program.

New Domain Structure and Weights: CMS also finalized a new domain structure and weighting policy that more closely aligns with the Meaningful Measures Initiative.  Under the updated scoring methodology, facilities that report a sufficient amount of data will receive a score on each measure included in the following four quality domains:

  • Patient & Family Engagement,
  • Care Coordination,
  • Clinical Care, and
  • Safety.

Updated Validation: CMS also finalized the expansion of the NHSN validation under the ESRD QIP to 150 facilities in PY 2021 to ensure accurate reporting and payment to facilities. CMS also finalized the adaptation of the CROWNWeb validation as a permanent feature of the program beginning in PY 2021.

Finalized Policies Beginning with the PY 2022 ESRD QIP

New Measures:  We finalized two new measures beginning with the PY 2022 ESRD QIP: 

  • Percentage of Prevalent Patients Placed on a Transplant Waiting List (PPPW), and
  • Medication Reconciliation for Patients Receiving Care at Dialysis Facilities (MedRec).

We did not finalize one proposed measure, Standardized First Kidney Transplant Waitlist Ratio (SWR) for Incident Dialysis Patients because the measure is narrower in scope and less reliable than PPPW.  

CHANGES TO THE DURABLE MEDICAL EQUIPMENT, PROSTHETICS, ORTHOTICS AND SUPPLIES (DMEPOS) COMPETITIVE BIDDING PROGRAM (CBP) AND FEE SCHEDULE PAYMENT RULES:

Background for the DMEPOS CBP and Fee Schedule Payment Rules

The Medicare payment rules for DME are set forth in section 1834(a) of the Act and 42 CFR part 414, subpart D of our regulations.  Section 1834(a) of the Act governs payment for DME covered under Part B and under Part A for a home health agency and provides for the implementation of a fee schedule payment methodology for DME furnished on or after January 1, 1989.  General payment rules for DME are set forth in section 1834(a) of the Act and § 414.210 of our regulations, and § 414.210 also contains paragraphs relating to payment for maintenance and servicing of items and replacement of items.  Sections 1834(a)(2) through (a)(7) of the Act set forth separate payment categories of DME and describe how the fee schedule amounts for items under each of the categories are established.  The payment rules for these categories are different and in some cases mutually exclusive. The Medicare payment basis for DME is equal to 80 percent of either the lower of the actual charge or the fee schedule amount for the item. The beneficiary coinsurance is equal to 20 percent of either the lower of the actual charge or the fee schedule amount for the item.

Section 1847(a) of the Act, as amended by section 302(b)(1) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 Pub. L. 108–173), requires CMS to establish and implement competitive bidding programs in competitive bidding areas (CBAs), referred to as the DMEPOS CBPs, throughout the United States for contract award purposes for the furnishing of certain competitively priced DMEPOS items and services.

Section 16008 of the 21st Century Cures Act Pub. L. 114-255) was enacted on December 13, 2016, and amended section 1834(a)(1)(G) of the Act to require, in the case of items and services furnished on or after January 1, 2019, that in making any adjustments to the fee schedule amounts in accordance with sections 1834(a)(1)(F)(ii) and (iii) of the Act, the Secretary shall: (1) solicit and take into account stakeholder input; and (2) take into account the highest bid by a winning supplier in a CBA and a comparison of each of the following factors with respect to non-CBAs and CBAs:

  • The average travel distance and cost associated with furnishing items and services in the area.
  • The average volume of items and services furnished by suppliers in the area.
  • The number of suppliers in the area.

Changes for the DMEPOS CBP and Fee Schedule Payment Rules: This final rule changes the bidding and pricing methodologies under the DMEPOS CBP; makes adjustments to DMEPOS fee schedule amounts using information from competitive bidding for items furnished from January 1, 2019 through December 31, 2020; adds new payment classes for liquid oxygen and oxygen equipment and a new methodology for ensuring that all new payment classes for oxygen and oxygen equipment added since 2006 are budget neutral; and establishes special payment rules for innovative multi-function ventilators or ventilators that perform functions of other DME.

A successful CBP for DMEPOS is important for the Medicare program, but many stakeholders have raised concerns about beneficiary access to items and services under the current CBP.  CMS sought ways to improve competitive bidding going forward and worked with market experts to leverage opportunities to increase the program’s effectiveness. Today’s rule finalizes market-oriented reforms to the DMEPOS CBP, simplifies the bidding process, and will better ensure the long-term sustainability of the DMEPOS CBP.  Changes to the DMEPOS CBP finalized today also reduce burden on suppliers by requiring suppliers to submit only one bid per product category would need to be submitted. In addition, the single payment amounts under DMEPOS CBP and establishing the SPAs for items in each product category would be based on the maximum winning bid for the lead item in the product category. These changes streamline the program and help ensure the long term sustainability of the program and the savings it generates.

The final rule establishes methodologies for adjusting fee schedule amounts for items subject to the DMEPOS CBP furnished in non-CBAs that consider the information mandated by section 16008 of the Cures Act. The rule maintains increases in DMEPOS fee schedule rates in rural and non-contiguous areas that are not subject to the DMEPOS CBP, using a 50/50 blend of adjusted and unadjusted fee amounts, in order to protect access to needed durable medical equipment.  The rule also finalizes our proposal to fully adjust the fee schedule rates in areas that are currently not CBAs, are not rural areas, and are located in the contiguous United States (U.S.).  It also established a methodology for adjusting fee schedule amounts for items subject to the DMEPOS CBP furnished in former CBAs when there is a gap in the DMEPOS CBP

In addition, this final rule establishes new payment classes for portable liquid oxygen equipment, portable gaseous oxygen equipment, and high flow portable liquid oxygen contents.  It establishes a new methodology for ensuring that all new payment classes for oxygen and oxygen equipment are budget neutral in accordance with section 1834(a)(9)(D)(ii) of the Act. The final rule also establishes new rules regarding payment for innovative ventilators that also perform the function of other items of DME that are subject to payment rules other than those at section 1834(a)(3) of the Act.

We are also finalizing our proposal to amend § 414.210(g)(7) to say that beginning on or after the date that the Northern Mariana Islands are included in a national mail order CBP, under this paragraph would no longer apply (83 FR 34389).

Request for Information on the Gap-Filling Process for Establishing Fees for New DMEPOS Items: CMS is considering if changes should be made to the gap-filling process for establishing fees for newly covered DMEPOS items paid on a fee schedule basis.  The gap-filling process allows Medicare to establish fee schedule amounts for new DMEPOS items that align with the statutory basis for the DMEPOS fee schedule.  In this final rule, CMS summarizes comments it received in response to an information solicitation on how the gap-filling process could be revised in a way that complies with the exclusive statutory payment rules for DMEPOS, but also prevents excessive overpayments or underpayments for new technology items and services.

The final rule can be downloaded from the Federal Register at: http://www.federalregister.gov/inspection.aspx.

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